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You have been asked to support analysis of acquisition decisions involving net present value analysis.

problem 1: You are analyzing the net present value of a project over a 16 year period. Based on the rates in the textbook, what is the actual discount rate you would use given that your analysis must consider the effects of inflation/deflation?

Risk free rate + inflation rate - deflation rate + premium

problem 2: What is the present value of $25,000 that you will receive at the end of two years?

problem 3: What is the present value of $2,000 a month over the next 3 years?

Cash flow $2,000 Period 36

Present value $21,542.03

problem 4: Cash Flow Scenario: Lease. Annual payments of $50,000 paid at the beginning of each of the next five years (total of $250,000). What is the NPV of all lease payments?

Annual payments $50,000 Payment period 5

Present value $212,538.64

problem 5: What is the net present value of a lease that requires you to pay $10,000 at the beginning of each year for the next five years and includes a provision for a rebate of $5,000 at eh end of Year 5?

Annual payments $10,000 Payment period 5 Rebate $5,000

Present value $39,234.87 32507.73

problem 6: What is the net present value of an item that has a purchase price of $20,000, requires $1,000 maintenance at the end of each year except year 4, and is expected to have a salvage value of $1,000 at the end of the 5 year useful life?

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